Supreme Court of Canada
In re W.H. Brookfield Estate The Royal Trust Company v.
The King, [1949] S.C.R. 329
Date: 1949-02-01
In the Matter of the Judicature Act, Order XXXIII
And
In the Matter of the
Estate of W. Herbert Brookfield, Late of Chester, in the County of Lunenburg,
in the Province of Nova Scotia, Deceased.
The Royal Trust Company, Administrator of the Estate of the late W. Herbert Brookfield, Late of Chester, in
the County of Lunenburg, in the Province of Nova Scotia, Deceased
(Plaintiff)
Appellant;
And
His Majesty the King in the
Right of the Province of Nova Scotia, (Defendant)
Respondent.
1948: Oct. 28; 1949: Feb.
1.
Present: Kerwin, Taschereau, Rand, Keilock and Estey JJ.
ON APPEAL FROM THE
SUPREME COURT OF NOVA SCOTIA
EN BANC
Revenue—Succession Duty—Constitutional Law—Shares in United
States companies, registered in names of nominees, endorsed in blank—No
transfer office in Nova Scotia, where certificates situate—Situs of
shares—Whether on death of testator domiciled in Nova Scotia, "property
situate in Nova Scotia"—The Succession Duty Act (N.S.), 1945, c.
7—Canada-United States Tax Convention Act, 19.4.4, (Dom.) c. V.
"B", domiciled in Nova Scotia, caused to be
registered in the names of employees at Halifax of the Royal Trust Company,
shares of United States companies having no share registry in Nova Scotia. The
certificates, endorsed in blank, had attached declarations of trust by the
registered holders to the effect that they had no right or interest in the
shares and had delivered them to the Trust Company to whom all dividends were
to be paid. The Trust Company, in accordance with "B's" written
instructions held the certificates for management and safekeeping. After
"B's" death it was appointed administrator with the will annexed of
his estate.
Held: that the shares were not "property situate
in Nova Scotia" within the meaning of The Succession Duty Act, s.
9(8). The situs of the shares was where they could be effectively dealt
with as between the
[Page 330]
company and the shareholders, namely
the United States. Succession duty was therefore not payable under the Succession
Duty Act, N.S., 1945, c. 7.
Stern v. the Queen [18961 1 Q.B:D. 211, distinguished.
Kerwin J. was of the opinion that even if that case be treated as an extension
in England .of the common law rule, it should not be so treated in Canada where
the question of divided jurisdiction arises, but that the test of situs laid
down in King v. National Trust [19331 S.C.R., 670, approved by Rex v.
Williams [1942] A.C. 541, should be followed. Rand J. was of the opinion
that the law-making sovereignity of England was to be distinguished from that
of a province of the Dominion of Canada, and that the power "of direct
taxation within the province", interpreted as it has been by the
authorities cited, is to be exercised on the footing that there is only one situs
for every class of property and that situs must be within the
province, and for shares, there can be no such division of interest or powers
in or annexed to them as would in the result attribute to them a situs in
two or more places. In the circumstances of the case, Kellock J., with the
concurrence of Estey J., said, the mere fact that the shares were not
registered in the name of the deceased does not render inapplicable the
principle of the decision in Rex v. Williams; In re Ferguson (1935) I.R.
21; Attorney-General v. Higgins 2 H. & N. 339.
Per Kerwin, Taschereau and Rand JJ., that the
provisions .of the Canada-United States of America Tax Convention Act, 1944,
(Dominion) do not affect the power of the Province of Nova Scotia to collect
and retain Succession Duty taxes.
APPEAL by the appellant, as Administrator with the Will
annexed of W. Herbert Brookfield, deceased, from the decision of the Supreme
Court of Nova Scotia in banco
whereby it was held—on a case stated as to—whether Succession Duty was
leviable and payable for the use of the Province of Nova Scotia in respect of
certain shares held by the late W. Herbert Brookfield at his death in companies
of American registry, which shares were registered in the name of his nominees
and had been endorsed by them in blank,—that Succession Duty was leviable and
payable for the use of that Province.
R. A. Ritchie for the appellant.
T. D. MacDonald K.C.
for the respondent.
KERWIN J.:—On October 7, 1937, W. Herbert Brookfield,
domiciled and resident in Nova Scotia, made an arrangement with Royal Trust
Company under which the latter from time to time, on his instructions, bought
shares of
[Page 331]
the capital stock of various
companies incorporated under the laws of different states of the United States
of America. Each of these companies had its head-office in the United States
'and maintained no share register or transfer office in Nova Scotia. The shares
were registered in the names of various persons employed by the trust company
at its office at Halifax and the certificates for such shares were endorsed in
blank by the respective persons in whose names they were made out. To each such
certificate, singly or by groups,
was attached a declaration of trust, signed by the person in whose name the certificate
was made out, declaring that such person held the shares as nominee of the
trust company and that he had furnished the company with authority to collect
and receive all dividends to which he, as registered owner, might become
entitled.
Mr. Brookfield died
November 14, 1944, having previously made his last will and testament, wherein
he appointed executrices but, they being unable or unwilling to act, administration
with the will annexed was granted to the Trust Company. The trust company paid
the Collector of Succession Duties for Nova Scotia a sum of money which
included succession duty in respect of the property to which the testator was
entitled in the shares. Later, the company paid the Collector of Inland Revenue
of the United States a sum of money as Federal Estate Tax in respect of the
said shares. The company claimed a refund of this latter amount from Nova
Scotia on the theory that the provisions of the Canada-United States of America
Tax Convention Act, chapter 31 Statutes of Canada, 1944, was applicable. The
taxes therein referred to are the taxes imposed under the Dominion
Succession, Duty Act and as to the first question raised by the stated
case, I agree with the Court en banc that such an Act and the Convention
could not have any effect upon the power of the province to collect and retain
succession duty taxes.
The second question is more difficult. Section 3(1) of the
Nova Scotia Succession Duty Act, chapter 7 of the 1945 Statutes, provides:-
3 (1) For the purpose of raising a revenue for provincial
purposes. and save as is Hereinafter otherwise expressly provided, there shall
he levied and paid for the use of the Province a duty (called Succession
[Page 332]
Duty), at the rates
hereinafter specified upon all property hereinafter mentioned which has passed
on the death of any person who has died on or since the 1st day of July, A.D.
1892, or which passes on the death of any person who shall hereafter die, the
duty to be according to the fair market value of such property at the date of
the death of the deceased.
and section 8(a) enacts:-
8. Save as is hereinafter otherwise expressly provided the
property On Which succession duty shall be levied and paid under this Act at
the rates hereinafter specified shall be as follows:—
(a) all property situate in Nova Scotia which has passed as
aforesaid or which passes as aforesaid on the death of any person, whether the
deceased was at the time of his death domiciled in Nova Scotia or elsewhere * *
*
The subject matter of the
taxation is property "situate in Nova Scotia." Mr. Brookfield had the
beneficial interest in the shares and undoubtedly at the time of his death that
interest passed within the meaning of the Act; but the question is whether such
interest is property situate in the province.
The court en banc decided
that the question was concluded by the decision in Stern v. The Queen, but before dealing
with that decision it is convenient to refer to certain propositions that have been
established in cases of this nature. They were formulated by Chief Justice
Duff, speaking for this court in The King v. National Trust Company, and were expressly
approved and repeated by the Judicial Committee in Rex v. Williams. As pointed out by
Lord Uthwatt for the Judicial Committee in Treasurer of Ontario. v. Blonde, the authorities
before the Williams case established that, if, for the purposes of
Succession Duty Acts (such as the Nova Scotia Act), there be found within a
particular provincial jurisdiction a place in which registered shares in a
company can be effectively dealt with as between the shareholders and company,
the shares are situate within that jurisdiction; but that in none of those
cases was there present the feature that there •were two places where the
shares could effectively be dealt with, one within, and the other outside, the
jurisdiction. Lord Uthwatt proceeded to say that The principle laid down in the
Williams case was that if it were possible on rational grounds to prefer
one of the alternative
[Page 333]
places to the other as the
place of transfer for the shares in question, the selection should be made
accordingly. It was in applying this principle that Viscount Maugham in the Williams
case stated that their Lordships had come to the conclusion that the
existence in Buffalo, at the date of the death, of certificates in the name of
the testator, endorsed by him in blank, must be decisive. Their Lordships did
not think it right to express any opinion as to the conclusion which they would
have come to if the certificates had not been endorsed and signed in blank by
the testator, since the point did not arise for decision and there were some
obvious distinctions arising in cases where the endorsement on certificates has
not been signed by the registered holder. This reservation, it will be noticed,
was made in a case where the judicial committee was faced with the problem of
preferring one of two alternative places, one of which was within the
jurisdiction of a province and the other outside Canada.
In the Blonde case,
as here, there was no place within the claiming province where a transfer of
the shares could be carried through but, differing from the present case, the
certificates, while physically situate in the claimant province, had not been
endorsed in blank by the registered holder. I assume without deciding that we are
dealing with "street certificates." Instating in the Blonde case
the first matter to be ascertained, Lord Uthwatt left aside the case of street
certificates but in my view the presence in Nova Scotia of such certificates
does not alter the effect of the proposition that in deciding in such cases as
this whether a matter is "taxation within the province" within head 2
of section 92 of the British North America Act, the test is where the
shares, not as between transferor and transferee, but as between the company
and the owner, may be effectively dealt with. A transferee of such a
certificate would, of course, obtain the right to take the necessary steps to
become the registered holder of the shares represented by the certificate but
that is not sufficient.
The judgment in Stern v. The Queen, supra, so strongly
relied upon by the respondent and followed by the court en banc, was
delivered by Wright J. on behalf of a Divi-
[Page 334]
signal Court. It was
concerned with certificates of shares in a foreign company. In the statement of
facts it is stated that while the forms of transfer and powers of attorney had
in regard to a large number of the shares been signed by the firms or persons in
whose names the certificates were made out, with regard to some of the shares,
of which the certificates were in the name of Stern Bros., such forms had not
been signed by them. Nevertheless, the case apparently proceeded on the basis
that all the certificates were included in the first class. It is evident that
Wright J. intended to follow Attorney-General v.
Bouwens. At the time, the view was held that he really
extended the operation of that decision (12 L.Q.R. 105), and in the Court of
Appeal in Winans v. Rex
at 1026, the Master of the Rolls states that the Bouwens case was
"possibly carried further in the case of Stern v. Reg."
In the Winans case it
was admitted for the purposes of argument that the bonds were all bearer bonds
passing by delivery and that they were capable of being dealt with, and were in
fact dealt with, for money on the stock exchange. The case had, therefore,
nothing to do with shares. It had to do with taxation under the Finance Act of
1894 which was held to be analogous, not to the Legacy and Succession Duty Acts
but to the old Probate Duty Acts, and it was in that connection that Lord
Atkinson, on the appeal to the House of Lords [1910] A.C. 27, at page 35, cited
the Bouwens and Stern cases for the proposition that probate duty
would before the passing of the 1894 Finance Act have undoubtedly been payable
in respect of the bonds. The only other law lord who referred to the Stern case
was Lord Gorell who, at page 39, states that the Bouwens case was
followed in Stern.
I am inclined therefore to
assume that the approval of the Stern case by Lord Atkinson and Lord
Gorell was confined to cases of bonds. Even if that be not so and if the Stern
case be treated as an extension in England of the common law rule in the Bouwens
case, it should not be so treated here in constitutional cases. In England
there is no question of divided jurisdiction but certainly in Canada
[Page 335]
it would make serious inroads upon the test of the situs of
shares as being where they may be effectively dealt with as between the company
and the owner.
Another argument of the respondent is put thus in his factum:—
The notional rule of the Brassard
case fixes the situs of the property of a registered owner of shares
as the locus of the share registry because that is where the rights that
make up that property may be dealt with:—the rights to vote, attend meetings
and receive dividends. The rule would completely lose its logic if applied to
such a case as the present where the deceased held none of these rights.
In the first place, Duff
J., as he then was, in Smith v. Levesque,
points out that situs ascribed to intangible property for the purpose of
determining the authority of the executor to deal with it is not, strictly
speaking, a fictitious situs. Then, so far as the respondent's present
contention is based upon the fact that the deceased was not the registered
owner nor in possession of the certificates, the trust company and its
employees, in my view, were merely Mr. Brookfield's agents, bound to follow his
instructions as to voting, attending meetings and receiving dividends. The
contention that the real nature of Mr. Brookfield's property was a right of
action under a Nova Scotia trust, is to overlook the realities of the
situation. Even if the trust company and its employees were trustees, the
trusts ended when the certificates, endorsed in blank, came into possession of
the trust company as administrator with the will annexed of the deceased.
The appeal .should be
allowed. Notwithstanding the form of the stated case and of a written agreement
signed on behalf of the parties, I understand that if the above views prevail,
the proper order to be made is that the answer to the following question
submitted for determination, namely:—
Whether succession duty was leviable and payable for the use
of the Province of Nova Scotia in respect to the property to which
the said W. Herbert Brookfield was at the time of his death entitled or which
passed upon his death by reason of the facts related in Paragraphs 5, 6 and 7
of the Stated Case herein?
is that such succession duty
was not leviable and payable for the use of the province of Nova . Scotia and
that the province of Nova Scotia was not right in exacting the said
[Page 336]
tax and is required to make a refund of the sum of $14,347.09
without costs of any of the proceedings in this court or in the court en
banc.
TASCHEREAU, J.:—W. Herbert
Brookfield died in November, 1944, and at the time of his death, had his
domicile in the province of Nova Scotia. The administration of his estate,
valued at more than $450,000 was given to the Royal Trust •Company, appellant
in the present case.
Prior to his death, the
testator caused to be registered in the names of certain persons, shares of
incorporated companies having their respective head-offices in the United
States of America, and no transfer office's in the province of Nova Scotia. It
is common ground that these shares were held on the testator's behalf, for
management and safe keeping, in the vaults of the Royal Trust Company in
Halifax. The certificates were endorsed in blank by the respective persons in
whose name's they were made out, and to each certificate was attached a
Declaration of Trust.
Some time after the death
of Mr. Brookfield, the Royal Trust Company, as administrator of the estate,
paid to the Collector of Succession Duties for the province of Nova Scotia, the
sum of $65,258.97, in which amount were included duties on the shares
previously referred to. An amount of $17,897.92 was also paid to the Collector
of Inland Revenue of the United States, being the Federal American taxes due on
the transfer of said shares. The appellant, then claimed a refund from the
province of Nova Scotia amounting to $14,347.09, and a stated case was
submitted to the Supreme •Court of Nova Scotia -en banc. The question
was the following:—
Whether succession duty was leviable and payable for the use
of the Province of Nova Scotia in respect to the property to which the said W.
Herbert Brookfield was at the time of his death entitled or which passed upon his
death by reason of the facts related in Paragraphs 5, 6 and 7 of the Stated
Case ;herein?
The unanimous answer was that such duties were leviable and
payable, and that the province of Nova Scotia was right in exacting the tax,
and was not required to make a refund thereof.
[Page 337]
I agree with the Supreme
Court en bane of Nova Scotia,
that the Royal Trust, as administrator, cannot base its claim for a refund •on
the ground that under the Canada-United States of America Tax Convention
Act, (Statutes of Canada, 1944, chap. 31) the taxes are not due. I fully
concur in the following statement made by Mr. Justice Doull:—
I am of opinion that this convention can have no application
to a question of situs arising under the Nova Scotia Succession Duty
Act. I do not agree with the suggestion that the Dominion Parliament has
power to change the Nova Scotia enactment, if such enactment is within the
power of the Nova Scotia Legislature under the British North America Act, but
in the present case, no such question arises for the convention by its terms
deals only with "the tax imposed under the Dominion Succession Duty
Act." Equally true it is that while Canada is defined as the
"Provinces, the Territories and Sable Island," the definition is only
"in a geographical sense." The convention does not purport to affect
any Provincial power.
But with due deference, I cannot agree with the court below on
the second point.
The relevant section of the
Nova Scotia Succession Duty
Act is the following:-
8. Save as is thereinafter otherwise expressly provided the
property on which succession duty shall be levied and paid under this Act at
the rates hereinafter specified shall be as follows:—
(a) all property situate in Nova Scotia which has passed as
aforesaid or which passes as aforesaid on the death of any person, whether the
deceased was at the time of his death domiciled in Nova Scotia or elsewhere * *
*
The words "property situate in Nova Scotia", mean
property, and in the present case, "shares that can be effectively dealt
with in Nova Scotia, as between the shareholders and the company". I am of
the opinion that these shares purchased with the deceased's money, in which of
course, he had a beneficial interest, issued in the name of nominees and
endorsed by them in (blank, cannot be dealt with in Nova Scotia, as between the
shareholder and the company, but only in the United States, where are the share
registers and transfer offices.
I would allow the appeal, but without costs here, or in the
court en bane.
RAND, J.:—At the threshold
of any consideration of the situs of shares of stock in relation to
succession duty lie two
[Page 338]
recent rulings of the
Judicial Committee. In Brassard v. Smith,
the test of the local situation, the place where shares are to be taken to
be situate, was enunciated in the question, where can they be effectually dealt
with? In Rex v. Williams,
this was declared to mean, dealt with as between the shareholder and the
company. Situs, in other words, is at the locus of the controlling
act from which the relation of shareholder immediately arises. As between
transferor and transferee the test would :be virtually useless since a
shareholder can, speaking generally, effectively transfer the right to a share
in any part of the world.
The latter judgment affirms
certain other propositions relating to death duties imposed by Canadian
provinces: first, that as between provinces, moveable or immoveable property
transmitted owing to death can have only one local situation; that the situs
of intangible property must be determined by some "principle or coherent
system of principles" deducible from the common law of England; and that a
provincial legislature is not competent to prescribe the conditions fixing. situs
for the purpose of defining the subjects of its taxing powers under section
92(2). The further rule was laid down that "the solution must be the same
in this case (where there were two valid registries, one in Ontario and one in
Buffalo, New York) as it would have been if the testator had been domiciled in
another province of Canada, say in Quebec, instead of in New York, and if all
the other facts had been as they were in fact, including the existence of a
separate registry in Quebec."
These pronouncements,
re-affirmed in Treasurer of Ontario v. Blonde, treat mere
transferability or merchantability of the right to :become a shareholder, in
the initial stages of the enquiry, as having little if any relevance to situs;
but they recognize as matters of a determinative nature what the law
creating the shares has provided to evidence their characteristics as property.
Registration in a book and representation by as certificate are tangible badges
which set conditions to complete transferability of the shares as well as
facilitate dealings with
[Page 339]
them. If, as in the case of
bearer shares, in analogy to bearer bonds, the issuing jurisdiction has in
effect embodied in a certain instrument the exclusive symbol of the total
rights created, then, certainly, as a rule, the situs is taken to be the
locality in which the instrument may at any time be.
Mr. MacDonald's contention
is that the merchantability of street certificates differentiates the case here
from the previous controversies. His argument is this: a share certificate
endorsed in blank by the registered holder and transferred to a purchaser by
delivery has come thereupon to represent a separate unit of property consisting
of the beneficial interest in the share coupled with a power in the bearer to
become a shareholder, with the delivery of the certificate concluding the
transaction between the parties; the right thus acquired, as against the
company, to make a transfer of ownership on the registry satisfies the
requirement that direct and immediate legal relations must arise between the
transferee and the company as the result of acts done at the situs. The
difference between the two cases is obvious: in the one a person is or can be
made a shareholder by acts within the jurisdiction; in the other, by such acts
he is clothed with power only to make himself a shareholder by means of his
further acts outside: and the test remains unsatisfied. For his proposition,
however, Mr. MacDonald has the support of Stern v. The Queen, and the question comes
down to this: whether in a province under the rules laid down, the legislative
situation is such as will permit the distinction to be acted on.
Under a law-making
sovereignty the subject-matter of taxation may in fact be anything on which
power can be exerted or in respect of which the payment of money can be made
the condition of the doing of an act or exercising a right within its
territorial boundaries. In the Stern case there were street certificates
within England which were essential to an entry of transfer on the register
outside of England; and the legislative authority of England extended in effect
to restrain the use of those certificates until, or to charge other property
admittedly in England with, the payment of certain monies related to them.
Whether
[Page 340]
these monies are taken to :be probate or estate duties or
legacy or succession duties does not, for purposes of .jurisdiction in taxes,
appear to be material.
But a province of the
Dominion is not apparently in that degree of sovereignty. The power of
"direct taxation within the province", interpreted as it has been by
the authorities cited, is to be exercised on the footing that there its only one
situs for every class of property and that that situs must be
within the province. And for Shares, there can be no such division of interests
or powers in or annexed to them as would in the result attribute to them a situs
in two or more places.
It is not suggested that the
law of New York has embodied the visible and exclusive evidence of these rights
in one tangible and moveable symbol to be looked upon and dealt with as a
chattel as in Attorney-General v. Bouwens,
and that being so, we are remitted to the considerations by which the shares
are localized in the place where they may be effectually dealt with. But it is
conceded that an entry of the purchaser's name on the registry of the shares in
New York would be essential to admitting him to membership in the company and
the case comes then directly within the principles laid down.
The appeal must, therefore, be allowed but as agreed without
costs in both courts.
KELLOCK J. (concurred in by
Estey J.):—The stated case shows that at his death on the 14th of November,
1944, the testator was domiciled and resided in Nova Scotia. Some time prior to
his death the shares here in question, all common shares, were registered,
pursuant to the instructions of the deceased, in the names of nominees of The
Royal Trust Company, the share certificates being endorsed in blank. In every
instance a "Declaration of Trust" was also executed by the nominee, stating
that the shares were registered in the name of the shareholder as the nominee
of The Royal Trust Company and that the certificates had been delivered to the
Trust Company together with an irrevocable authority to collect and receive the
dividends. It appears also that these certificates were
[Page 341]
so delivered pursuant to the direction of the deceased for
safekeeping and management. They were therefore in the possession of the
deceased through his agent.
The respondent contends that
the case is not within the principle of the decision in Rex.v.
Williams,
for the reason that although the deceased was the beneficial owner, he was
not the registered owner. It is said that in the case of certificates endorsed
in blank, where the deceased was not the registered shareholder, the physical
location of the certificates fixes the situs for succession duty
purposes, their marketability there, according to the contention, being the
'determining consideration; and
that in any event the only property which passed on the death was a chose in
action under a Nova Scotia trust.
The statute which is
applicable is the Succession Duty Act of Nova Scotia, 9 Geo. VI, c. 7.
By section 3, subsection 1, provision is made for the levying of a
succession duty upon all property mentioned in the statute passing on the death
of any person who has died on or since the 1st day of July, 1892. By subsection
2 "property passing on the death" is deemed to include for all
purposes of the Act:
(a) property of which the deceased was at the time of his
death competent to dispose.
By section 2 (b) the expression
"property" includes real and personal property of every description,
whether tangible or intangible, and every estate and interest therein. By
subsection 2 (a) of section 2, a person shall be deemed competent to dispose of
property for the purposes of the Act:
if he has such an estate or interest therein or such general
power as would if he were sui juris enable him to dispose of the
property.
In Bradbury v. English Sewing Cotton Co., Lord Wrenbury
said at page 767:
A share is, therefore, a fractional part of the capital. It
confers upon the holder a certain right to a proportionate part of the assets
of the corporation.
Certain rights or incidents are attached thereto, such as the
right to attend meetings and to vote, etc.
In the case at bar the property
passing on the death of the late Mr. Brookfield was, in my opinion, the full
[Page 342]
beneficial interest in the
shares and was not merely a chose in action. I think it unnecessary to
say more as to the second branch of the argument.
Coming to the first branch,
the deceased in Rex v. Williams, supra, an American citizen, domiciled
in the state of New York, was the owner of certain shares of Lake Shore Mines
Ltd., a company incorporated by letters patent issued under the Ontario
Companies Act. The share certificates Were at all material times physically
located in the state of New York and they had been endorsed in blank by the
testator. At the date of the death, the company had an office in Toronto and
one in Buffalo, in the state of New York, at both of which transfers of shares
might properly be made. The executors had taken out probate in the state of New
York and subsequently ancillary letters probate in Ontario, where the testator
possessed property apart from the shares. The question for decision was as to
whether the testator's property in the shares was liable to succession duty in
Ontario. It was held that the shares were not so subject, not being property
situate in Ontario. In the course of delivering the opinion of the Board,
Viscount Maugham referred to the earlier decision of the Board in Brassard
v. Smith,
where the rule was laid down that in cases where there is but a single
province in Canada in which shares of a company may be effectively dealt with,
i.e., where they can be transferred on the books of the company, the situs of
the shares for fiscal purposes is in that province. At page 558 he said:
The first observation is that the phrase used in laying down
the principle clearly means "where the shares can be effectively dealt with
as between the shareholder and the company, so that the transferee will become
legally entitled to all the rights of a member", e.g., the right of
attending meetings and voting and of receiving dividends.
In the circumstances
present, in the Williams' case, as already noted, the shares were
transferable either in Ontario or in New York, and it was held that the
presence of the certificate's, endorsed as mentioned, in New York, was the
determining element. As to whether a .different rule applies as between two
provinces than as between one or more provinces and a foreign country, their
Lordships stated at page 559:
[Page 343]
They observe that the solution must be the same in this case
as it would have been if the testator had been domiciled in another province of
Canada, say in Quebec, instead of in New York, and if all the other facts had
been as they were in fact, including the existence of a separate
registry in Quebec.
The same principle was
applied in Treasurer of Ontario
v. Aberdein.
The present problem differs
from the problem presented by the facts in the Williams' case in that in
the case at bar the deceased was not the registered owner.
In the Williams' case Viscount Maugham said at page
556:
The rule laid down in Brassard v. Smith
would in practice be useless if the place where the certificates for shares
were found at the time of the death should be taken to be necessarily the situs
of the shares. Their Lordships have no hesitation in holding that the situs
of the certificates is not, taken alone, sufficient to afford a solution to
the present problem.
In adverting to the fact
that the certificates in the Williams' case had been endorsed in blank,
their Lordships said at page 557:
This had the admitted result of making a delivery of the
certificates with the endorsements signed in blank a good assignment of the
shares, since it passed a title to the assignees both legal and equitable, with
a right as against the company to obtain registration and to obtain new
certificates; Colonial Bank v. Cady.
It must be accepted, therefore, as a fact, that the certificates were currently
marketable in the State of New York as securities for the shares, and that they
were documents necessary for vouching the title of the testator to the shares.
Again at page 558:
The late owner in the normal case was absolutely entitled to
the shares as the registered owner of them in the books of the company, and, if
resident in a country or province different from that in which the shares can
be effectively dealt with, could nevertheless have sold the shares and
completed the transaction by an attorney or otherwise.
In the present case the
deceased, although not the registered owner, was in a position to deliver the
certificates, endorsed in blank, to whomsoever he pleased and thereby to pass
to his assignee the interest of the registered shareholder (Colonial Bank v.
Cady, supra, per Lord Watson at 277) as well as his own interest, with a
right as against the company to obtain registration and new certificates. It is
difficult perhaps to see why, if the respondent's contention
[Page 344]
be correct, the ability of a registered owner to sell his shares
and to satisfy his contract by delivering endorsed certificates, does not touch
the question of situs, while the same capacity on the part of a
beneficial owner has not the same effect.
In the Williams' case their Lordships went on to say at
page 560:
The certificates endorsed and signed as they were cannot be
regarded as mere evidence of title. They were valuable documents situate in
Buffalo and marketable there, and a transferee was capable of being registered
as holder there without leaving the State of New York or performing any act in Ontario.
On the testator's death his legal personal representatives in the State of New
York became the lawful holders of the certificates, entitled to deal with them
there. Any sale by them would be "in order", and the purchaser could
obtain registration in the Buffalo registry. If we contrast the position in
Ontario the difference is obvious. Nothing effective could lawfully be done
there without producing the certificates. In a business sense the shares at
the date of the death could effectively be dealt with in Buffalo and not in
Ontario.
In the case at bar the
shares could be "effectively dealt" with only in some one or more of
the United States. The transferee could not become "legally entitled to
all the rights of :a member" in Nova Scotia; see Viscount Maugham at page
558. It seems to me therefore •that, in the circumstances of the present case,
the mere fact that the shares were not registered in the name of the deceased
•does not render inapplicable the principle of the decision in Rex v.
Williams. The certificates here in question all require the production of
the certificate for the purpose of transfer.
The conclusion as above to
which I have come was the conclusion arrived at in somewhat similar
circumstances in the •Supreme Court of the Irish Free State in In re
Ferguson.
In that case shares in a British company belonging to a person of unsound
mind, which had been transferred into the name of the accountant of the Courts
of Justice, were held to have their situs in England where the register
of shareholders was located. The statute there considered was the Finance Act,
1894, the relevant provisions of which are all reproduced in the Nova Scotia
statute set out above. The court applied the principle of
[Page 345]
Attorney-General v. Higgins,
and Brassard v. Smith, supra, as well as Erie Beach Co., Ltd., v.
Attorney-General for Ontario.
The argument presented in the present case on behalf of the respondent was
rejected in Ferguson's case.
Hanna, J., at page 49 says:—
Mr. McCann distinguishes all these cases by the fact that in
each of them the legal interest and the beneficial ownership were in the same
person. In my view that cannot affect the position, even if we resort to the
dissection of the legal situation as the Revenue Commissioners invite us to do.
If the Chief Justice desired by an order to deal with the shares, it could not
be effective save by operating upon the register in Great Britain where the
property is situate and seeking in aid, if necessary, the jurisdiction of the
British Courts. The executors also, in the final resort, must go to the
register in Great Britain or appeal to the British Court. Accordingly, I think
that the distinction drawn by Mr. McCann in this case does not effect the principle
once the Court comes to the conclusion that it is the shares that pass.
Fitzgibbon J., at page 65 in delivering the judgment on appeal
said:
The law is summed up by Lord Merrivale, quoting from Baron
Martin's judgment in Attorney-General v. Higgins:
"When transfer of shares in a company must be effected by a change in the
register, the place where the register is required by law to be kept determines
the locality of the shares." The Revenue Commissioners can have no doubt
that estate duty is payable in Great Britain upon these shares by reason of the
death •of Sarah Ferguson; it has been decided by us that it was the property in
these shares that passed upon her death; and it follows that the respondents
are entitled to an allowance of the sum paid in duty in Great Britain.
At page 66 Fitzgibbon J., also said in dealing with the same
point:
We do not agree with this contention, having regard to the
circumstances in which the name of the Accountant came to be placed upon the
registers, but in any event the decision of Eve J. in In re Aschrott,
is an authority for the proposition that the same principles apply even when
the name of the deceased person is not actually upon the register of
shareholders at the time of his death.
In Aschrott's case
the testator, a German subject, was entitled to stock, shares and securities in
English, South African and American companies which had been purchased for him by
certain German banks acting through their London agencies. The certificates
were in all cases situate in London and the securities themselves were
transferable in London at the outbreak of the war of 1914 and at the date of
the testator's death in 1915. The securities were
[Page 346]
held in large blocks by the
London agencies and had not prior to his death been specifically allocated to
the testator so that it would appear that none of the certificates were in his
name. By virtue of the provisions of the Treaty of Peace Orders all the shares
became charged with the claim of the Custodian of Enemy Property. The question
for decision in the case was whether estate duty was payable on all or any of
the securities which in turn depended, as put by Eve J., on the question
"were these shares in companies registered in South Africa and America,
but having offices in England where certificates could be produced, transfers
passed, and the names of transferees entered on the register, property situate
out of the United Kingdom?" It was held that the shares had their situs
in England.
If it be the province where
the shares are situate which has the constitutional authority to levy a
succession duty upon the death of the owner, it seems past question that, upon
the death of the person in Nova Scotia who is the registered shareholder but
who is not the beneficial owner, if the register, of the company is situate in
another province, say Quebec, the latter province would be entitled to levy
succession duty in respect of nothing more than the interest of the nominee,
i.e., the bare legal interest. The value of such interest would appear to be
nominal only.
In the court below reliance
was placed on the case Stern v. The Queen.
In that case the testator died in England owning shares in foreign companies,
the certificates being in England and standing in the names of persons other
than the testator. Some were endorsed' but some had not been at the time of the
death. It was held that the certificates being currently marketable in England
were liable to probate duty.
That case was decided upon
a stated case which contained the statement, inter alia, that the
delivery of a certificate endorsed by the registered owner in blank constitutes
as between the parties to the transaction a good assignment of "the
shares" both in law and in equity passing the title to the shares both
legal and equitable. In giving judgment Wright J. said at p. 218:
There is in this country a document the existence of which vouches and is necessary for vouching the title of
some one to the
[Page 347]
foreign share, so that in
the absence of that document no one at all could establish a title to the share
* * * It being a marketable security 'operative, though not completely
operative, to pass the title, and. having a marketable value here, I think that
it is itself a document which is a document of value in the hands of the
executors within the jurisdiction of the Ordinary.
It would appear that the
considerations which determined the decision were the existence of the endorsed
certificates within the jurisdiction and their marketability there, together
with the fact that as between transferor and transferee, the legal and
equitable title to "the shares" was vested in the transferee.
Marketability as later laid down in the Williams' case
"does not touch the question of situs", and the "situs of
the certificates is not, taken alone, sufficient to afford a solution to the
problem."
Unless the decision in Stern's case proceeded on the
ground, apparently assumed by counsel in Aschrott's case at: 317, and in
Blonde's case at p. 27, that the shares in question in that case were
transferable on branch registers in. England, I cannot consider it a governing
authority as to the situs of shares for the purposes of succession duty
in one of the provinces of Canada where situs has been authoritatively
determined to depend on the considerations already discussed and not mentioned
in Stern's case.
In Winans v. Attorney-General,
a case concerned with bonds, Lord Atkinson at page 35 treated Stern's case
and Attorney-General v. Bouwens, as founded on a common principle, as
did also Lord Gorell at pp. 38-39. At page 31 Lord Atkinson said:
It is not disputed that the bonds are payable to bearer, are
marketable in England, are not registered in the name of the deceased, nor is
his name mentioned in them, are transferable in England by delivery, and that
no act other than delivery need be done in or out of England to complete the
title of the transferee.
All of this applies to the certificates here in question except
the last, and the first and "leading" enquiry in the case of shares
is the location of the place of transfer where the transferee will become legally
entitled to all the rights of a member. That consideration is the same for
the transferee whether or not he receives a certificate directly from the
registered shareholder. In a case of shares as distinct
[Page 348]
from the case of bearer bonds Attorney-General v. Bouwens has
been determined not to be, but Attorney-General v. Higgins, the
governing authority.
In the judgment in Blonde's
case, Lord Uthwatt left open the question of the situs of
"street certificates". Until a different rule is established by their
Lordships in such cases however, my view is as above. Bearer share warrants are
subject to different considerations. In such case the legislation usually
provides that delivery of the warrant in itself effects a transfer of the
shares without more.
I would allow the appeal. There should be no costs in this
court or below.
Appeal allowed without
costs.
Solicitor for the appellant: Roland A. Ritchie.
Solicitor for the respondent: Thomas D. MacDonald.
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